Qantas anxious as rival airlines fight for government travel business

Sydney Morning Herald

Monday February 15, 2010

Matt O'Sullivan

MORE than a dozen airlines and large travel-management consultancies will find out soon whether they have broken Qantas's stranglehold on the federal government's $500 million-a year travel budget.The prospect of Qantas losing a big share of the government's high-yielding domestic and international travel has been one of the biggest drags on its share price in recent months, analysts say. Even if it keeps most of the contract, it faces having to fly politicians, public servants and defence personnel more cheaply.Qantas is seen as most vulnerable to losing work on domestic routes to Virgin Blue and, to a lesser extent, Regional Express. Tiger Airways did not put in a tender.It is also vying for the international travel budget with almost all of the biggest foreign airlines that fly to Australia. BusinessDay has confirmed that Singapore Airlines, Cathay Pacific, Etihad, Emirates, Malaysian Airlines, United Airlines and Air New Zealand have all submitted bids."You would be crazy not to be involved," said Alison Espley, the general manager for Australiasia for United Airlines. "It is an exciting opportunity and that is why so many people are interested."Travel management consultants such as Flight Centre have also submitted bids. It is believed American Express Business Travel and Carlson Wagonlit Travel are also in the running.The Department of Finance has been seeking more information from the airlines in recent weeks. The outcome of the tender is expected this month."The bigger loss for Qantas is probably on the domestic front," an insider said, adding that the government was bound to give more work than it has previously to other Australian-owned airlines."Prima facie it looks like they are going to look at what is the best option for the government [on international routes]. We are hopeful that if you look at it on a fair and objective basis everyone stands a chance."A JPMorgan analyst, Matt Crowe, said the big risk for Qantas was in the domestic market, where Virgin Blue could pick up a larger slice.He said Qantas was likely to keep most government travel, but the key would be the extent to which it would have to offer cheaper flights."The change will be in price ... Qantas has everything to lose."Despite the bids from an array of foreign airlines, Mr Crowe said Qantas was likely to hold largely onto the international travel budget because of its network and frequent flyer scheme, which has long been a huge advantage in attracting corporate travellers. "The Australian Government also likes to support an Australian company," he said.The big attraction for travel agencies and airlines in the tender are the fees gained from the larger percentage of cancelled flights by government officials.